2 December 2016
Transcript - #2016176, 2016

Doorstop Interview, Canberra

SUBJECTS: Council on Federal Financial Relations; Intergovernmental Agreement on Competition and Productivity Enhancing Reforms (IGA); Turnbull Government’s policies to drive investment in our economy; affordable housing

TREASURER:

It has been a very productive meeting of the State and Territory Treasurers here today in Canberra and I want to thank them for their very engaged participation in the meeting today. We were able to progress a number of matters which will now be able to be considered at the COAG. The first of those is moving forward with the Intergovernmental Agreement on Competition Reform which flows on from the Harper reforms. Now this today was simply a matter of agreeing that this should be able to go forward in the COAG meeting. This does not mean that States and Territories have signed up to this – I want to be clear about that. But there is a lot of enthusiasm for trying to pursue these reforms. How they are funded and the resources that are put behind this are all legitimate issues that have been raised by the States and Territories. As a group, we all agreed that it was important that this debate continued and we were able to move that forward for leaders to consider. Obviously, when it comes to whether how we resource competition reform payments or a renewal of national partnership agreements and those funding issues which are the usual fare of discussions with State and Territory Treasurers, my message is very clear and that is the government needs to consolidate the budget, and the budget savings measures that we’ve put before this Parliament, are necessary to be achieved to protect our triple-A credit rating and put us in the strongest possible position to be able to invest in competition reform payments that would be the subject of any potential agreement on that issue between States and Territories, as well as renewing the many other areas of agreement that has existed in the former partnership arrangements. So getting the budget passed – more than $21 billion of budget improvements measures have already been passed over the course of just since the last election and we need to continue on with that work when we come back next year. So the states’ house, which is the Senate, is the place where there is the opportunity for those States to be well represented and the best way we can support them is by passing the budget.

Another very important issue that we discussed today is our collective concern about the need to drive investment in our economies. Whether they’re resource states which have been particularly hit by the significant fall in capital investment or they’re faster growing states on the eastern seaboard, particularly New South Wales and Victoria, and attracting that investment capital. Now whether it’s the Government’s Enterprise Tax Plan or a long pipeline on infrastructure investments, States and Territories and the Commonwealth all agree that this is necessary to attract that capital, to attract that investment. So we remain all very concerned and all very interested in ways that an investment culture can be fostered and encouraged, that the hurdle rates which investors are looking at can be more aligned to the low interest rate environment which we now find ourselves in and expect to be in for some time. So driving that investment is an important area. Another issue, of course, was the Affordable Housing Working Group report that came back to CFFR today – the Council on Federal Financial Relations – and we adopted the four recommendations of that report and it’s being released publicly today. What’s important about this today is that we focused on the rental market for affordable accommodation which is that bridging point between the private rental market and social housing. A lot of the discussion which is often had about housing is just at when you can buy a home, but 30 per cent of Australians rent and around half of those are on lower incomes. So it’s important that, as a group, we believe that when you’re dealing with housing, you’ve got to deal with it from homelessness all the way through and today’s report, I think, demonstrated that our focus is right across the spectrum – and all treasurers were very keen to stress that point. There are all sorts of things we can do in this area and we had very good discussions about that. I want to commend the State and Territories, particularly for the work they’ve been doing on the supply side. We do have some good strong pipelines of supply, we do see approvals now starting to taper off. So continuing that work of dealing with the supply side, not just at the city fringe but in the centre, in the middle, accommodation for people with disabilities, ageing, all of this is important in addressing the housing market. Finally, we were looking at the issue of digital disruption and disruption more generally in our economies and what the impact of that is from an opportunity point of view and how services can be better delivered, how systems can work better across delivery of services right across the spectrum. But also its impact of the sustainability of our revenue bases as well and we had some very good discussions there in sharing the practice of states and again, I want to thank the State and Territory Treasurers for their contributions on all those matters. So that’s where we got to today and now COAG will come forward and they will pick up on the items.

QUESTION:

What specifically can you tell the public that you’re doing in terms of making housing more affordable?

TREASURER:

Well, today we agreed to four recommendations from the Affordable Housing Working Group and they all related, particularly the first one, to housing bond aggregation. One of the challenges that is faced by those developing affordable housing is access to longer term affordable finance. The access to capital is a critical issue to that sector and this would involve states and the Commonwealth working together to act as a bond aggregator to put finance into those developments. Now that’s a very concrete, constructive thing for us to be doing, particularly in a rate environment that we have at the moment and if the Commonwealth just took that on or did it in partnership with the states, that’s something that we’ll now work on. But it was very constructive.

QUESTION:

Would that be some sort of new authority or something?

TREASURER:

When you see the report you’ll see there are many ways that can be achieved and so we’ll now go to the next step of how this would be done. But that is just one part of the many different tools that we all have available to us to improve housing affordability. Whether it’s social housing, affordable housing, in the private realm market or, indeed, people who are trying to buy.

QUESTION:

[inaudible] revisit the Government’s position on negative gearing?

TREASURER:

The Government is not revisiting its position on negative gearing.

QUESTION:

But are you prepared to revisit the position on negative gearing?

TREASURER:

No and the reason we're not is because those who are renting - today we were focusing on those who are renting and it is the government's view that the mum and dad investors who actually provide the capital for the nation's rental housing stock, if we were to withdraw that, then that has the only outcome of increasing rents, which is not good news for people on the lowest of incomes who are renting, and it would squeeze the market, whether it's in access to capital or otherwise, for those people to put a roof over their heads. So the government's view on negative gearing I think everybody knows. But that issue is - even for those who think it may have a different impact, that on its own, even under their own scenarios, does not address the issue. You have to look at this thing right across the board and that's what we're doing. None of us are pretending there is a silver bullet to this and today we were focusing on an area which frankly doesn't get enough attention when people are talking about housing.

QUESTION:

But to be clear, that policy is set in stone - the policy you took to the last election on negative gearing...

TREASURER:

I think I've made my position very clear.

QUESTION:

How many states raised that with you though? Negative gearing?

TREASURER:

Well, it actually wasn't raised so much in that sense. We had a general discussion about taxation arrangements on housing. Stamp duties were talked about, planning rules were talked about, finance in particular for social housing and how we spend money on social housing, how we deal with accessing the right sort of stock in social housing to support people who are dependent upon that. We actually spent most of our time today talking about the area that government has the most direct role in the housing sector, which is in public housing, affordable housing, and obviously we were talking about the renewal of the National Partnership Agreement on Homelessness. So I know there's lots of interest in the area on buying your first home and that's tremendously important but as a group of treasurers, we don't have a blind spot when it comes to those on low incomes who are in need of social housing and affordable housing, and that's where we really put all of our attention into those discussions.

QUESTION:

Did the South Australian Treasurer bring up the Luxury Car Tax?

TREASURER:

Look, I will let Tom speak for himself, but the point that was raised today was that with the transition that is now well underway in the automotive sector in Australia, those rules that were previously brought in were trying to support the retention of that automotive sector in Australia and so there was discussion about whether those tax arrangements were still contemporary. But where they're most important is in, if you like, the green carve-out on those areas where we all want to - through their fleets and things like that - be able to better assist having a more carbon-friendly car fleet for state and territory governments, it's obviously a big cost for them, and the taxation arrangements that impact on that can hamper it. Treasurers made the point that it has moved on in terms of what's happening on the ground. Now, we take these suggestions on board. We will consider these suggestions. The government certainly hasn't provided any response to that. But I think the point is interesting that hybrids, electric vehicles, these sorts of vehicles, currently fall foul of those tax arrangements and if we actually want to encourage those types of vehicles to reduce emissions, well, it's common sense, I think, for the South Australian Treasurer to raise those issues.

QUESTION:

Did the Victorian government raise infrastructure spending in the state?

TREASURER:

Oh, of course. Every state treasurer and every territory treasurer raises every form of spending you can imagine at these meetings. That's their job, and they do and what we're committed to, though, as a group, regardless of what side of politics we come from, or what state or territory we come from, is we have to spend the money as best as we can. We know there is not an endless pool of funds that are out there and any dollar any of us spends, we spend because someone has paid tax to deliver that revenue. All state and territory treasurers, together with myself, are very conscious of that responsibility, and so how we do it, how we work better to do it - I mean, the issues on competition policy reform, service delivery, how we better use the disruptive technology as an opportunity to reduce the costs, unnecessary costs, that can be involved in services, all important stuff. So yes, of course, they raise those issues. I would expect them to. But they were done in that context.

QUESTION:

Treasurer, just on housing supply, you said that the states are working on housing supply - there has been a lot of work done by the states…

TREASURER:

There has.

QUESTON: What is the Federal Government doing, though, to make housing more affordable? Under what is your remit?

TREASURER:

Well, just today, the paper that we took back into CFFR, and we adopted the recommendations, was the paper I commissioned not long after becoming Treasurer. So dealing with the issues of affordable housing financing has been a keen focus of the government and we've been able to get to a point today where we've adopted those recommendations to go forward. I'll have a lot more to say about this next year as we continue to work through a lot of these issues. But my point is, it's not just one part of the housing market you've got to focus on. Together with states and territories, we spend around about $11 billion - $11 billion every single year - on everything from homelessness through to issues where we'd like to be a bit more involved, into encouraging greater reforms on planning and zoning and things like this, which was what was before treasurers today. Now, when those systems work better, then your supply frees up. But this isn't an argument with the states and territories, at all - it is a collaborative exercise and I commend all the states and territories. We were hearing today of what they were doing in Tasmania to improve this - good for them, what NSW has done, what Victoria has done.

QUESTION:

Treasurer, the WA government has announced this week it plans to partially privatise Western Power for electricity in Western Australia. The Federal Government previously had the asset recycling fund...

TREASURER:

That program has concluded.

QUESTION:

Was there any discussion, maybe, to help WA with any federal funding at all?

TREASURER:

We've already provided $1 billion to the West Australian government in the last two budgets and we're very aware of the real challenges provided which Western Australia has been confronting because of the GST distribution formula, and that's why we have provided them $1 billion over the last two budgets in infrastructure, and obviously we'll continue to look at those issues going forward.

QUESTION:

Are you able to give your counterparts any more information about what the competition payments might look like, as in what's on the table from your end?

TREASURER:

No, and quite deliberately. My point was this: let's build the framework which can enable the competition payments system to work. At present, the government is in a position to put resource towards that. We'll hopefully be in a position to do that, if we can, in the next budget, but that is a matter to be considered before the next budget. But that is not possible - not possible - if we are unable to get the support of the parliament to pass the budget savings measures. You can't spend money with money that's not there. If the Parliament is not going to be able to support the government in consolidating the budget, then issues like that, it makes it very difficult to proceed with them. I was very transparent and up-front with states and territories today. I gave them no commitment on the funding for those arrangements. But that shouldn't stop us from putting in the mechanisms to be able to use them when we are in a position to do that. That is just work you can get on with. If we're in a position to put resources into that, well, that would be great. But step one - pass the budget. Talk to the state's house.

QUESTION:

Has a decision been made on the structure of the National Partnership Agreement on Homelessness … [inaudible].

TREASURER:

It does. This is the time of year in which, particularly for agreements like that, we hope to put ourselves in a position to be making an announcement, and so when we're in a position to do that, we will.

QUESTION:

There will be another agreement though?

TREASURER:

When we are in a position to make an announcement on that we will.

QUESTION:

On an unrelated matter, do you think the Fremantle Council should have power to...

TREASURER:

I'm not familiar with the matter you are referring to. Yep. Last one.

QUESTION:

Just quickly, what do you make of the Commonwealth Bank raising its fixed-term owner occupier and investment loans by 65 basis points?

TREASURER:

Well, I have just literally come out of the meeting and I haven't had any opportunity to review what you have just referred to. But the thing about the banking system, the thing about your home loan or your credit card, or whatever it is, if you don't like the rate you are paying, you should go to another bank. Banks will make their decisions and they need to justify their decisions to their customers. We called each of the bank chief executives here to an inquiry and it was a very, very fulsome inquiry that was conducted by the chairman, David Coleman. He has put forward some excellent recommendations which the government is looking very favourably on. Banks must be accountable to their customers for what they are charging them for the services they provide. Customers who are unsatisfied with that should go to another bank.

Thank you very much.